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Cross-ownership in network industries: when less competition implies less profits or more social welfare

Author

Listed:
  • Domenico Buccella

    (Kozminski University)

  • Luciano Fanti

    (University of Pisa)

  • Luca Gori

    (University of Pisa)

Abstract

Considering a Cournot duopoly with network goods, this paper shows some unconventional effects due to passive unilateral cross-ownership (i.e., one firm holds non-controlling shares in the rival firm): the industry profitability of the network duopoly can be reduced, or social welfare increased, depending on the degree of compatibility between goods (full, partial, no compatibility). These findings challenge the conventional results for which cross-holdings improve total profitability and worsen social welfare. The work eventually pinpoints the empirical and policy implications of cross-ownership on profits and welfare.

Suggested Citation

  • Domenico Buccella & Luciano Fanti & Luca Gori, 2025. "Cross-ownership in network industries: when less competition implies less profits or more social welfare," Journal of Economics, Springer, vol. 144(3), pages 203-230, April.
    • Handle: RePEc:kap:jeczfn:v:144:y:2025:i:3:d:10.1007_s00712-024-00888-5
    DOI: 10.1007/s00712-024-00888-5
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    More about this item

    Keywords

    Network externality; Product compatibility; Cournot duopoly; Cross-ownership;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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